Bharat Forge Achieves Strong Q2 FY24 Growth And Market Expansion

Bharat Forge Limited, a leading Indian multinational company, has recently released its earnings update for the second quarter (Q2) of the fiscal year 2023–24. The company has showcased a robust performance across various segments and geographies, with significant year-on-year (YoY) growth in revenues and profitability. This article will delve into the key highlights of Bharat Forge Limited's Q2 FY 2023–24 earnings update, including its business performance, financials, and future prospects.

Business Performance:

Bharat Forge Limited's standalone business has secured new orders worth Rs 740 crore in H1 FY24, with a notable focus on e-mobility programs. The defence vertical, KSSL, has also witnessed substantial growth, securing new business worth Rs 1,100 crore during the quarter. The company's overseas operations have shown improvement, primarily driven by increased capacity utilisation in the aluminium business. The management expects sustained profitability in the overseas business within the next 12–18 months through a combination of achieving profitability in the aluminium business and optimising product and manufacturing in the steel business.

Financial Highlights:

During Q2 FY24, Bharat Forge Limited registered a strong financial performance, with a YoY revenue growth of 20.7 per cent and profitability growth of 29.3 per cent. The company's EBITDA margins expanded by 310 basis points, reaching 27.4 per cent, driven by operating leverage and cost control measures. Additionally, the company reduced its debt by Rs 307 crore, resulting in a net-of-cash return on capital employed (ROCE) inching closer to the 20% mark.

 Segment-wise Analysis:

1. Automotive Business: The commercial vehicle (CV) business remained marginally positive, with steady North American Class 8 build rates, inventory levels, and sales. European CV sales also stabilised as economic activity gradually recovered. The CV business continued to generate steady growth, supported by market share gains and the addition of new geographies.

2. Passenger Vehicles: The passenger vehicle (PV) sector has been a standout performer for Bharat Forge Limited, driven by market share gains, increasing value addition, and order wins from newer geographies and customers. PV exports now account for approximately 25 percent of the company's overall exports.

 Indian subsidiary financials:

Bharat Forge Limited's Indian subsidiaries, including KSSL, KPTL, BFISL, and BFL + BFIL (Trading subsidiary), have showcased positive financial performance. KSSL reported a total revenue of Rs 2,962 million, with an EBITDA of 169 million and a PBT before exchange gain or loss of 311 million during July and September 2023.

Future Outlook:

Bharat Forge Limited expects the momentum in its businesses to continue in the second half (H2) of FY24, along with strong cash flow generation. The company remains focused on tapping new customers, enhancing engagement with existing ones, and exploring new markets within the industrial space, including construction and mining, railways, agri-equipment, and aerospace.

Bharat Forge Limited's Q2 FY 2023–24 earnings update reflects a strong performance across segments and geographies. The company has witnessed significant growth in